Federal Sequestration: What it Means for States

By Alex Fitzsimmons

In Washington, D.C., the word on everyone’s lips is “sequestration.” Nobody wants it, but everyone seems powerless to stop it. So what is sequestration, and why should states care?

NCSL’s budget team answers these questions in a pair of new reports designed to assess the impact of the federal sequester on state budgets. 

Sequestration is a formal way of referring to mandatory cuts to federal programs. It is a process by which funds are literally taken away from federal agencies. In this case, Congress sequestered $1.2 trillion in mandatory cuts—half from domestic programs, half from defense spending.

Here are some examples of what states can expect in terms of reduced funding for FY 2013, according to the White House Office of Management and Budget’s (OMB) sequestration report:

• $1 billion plus cut to Title One education programs.
• $600 million less for Head Start.
• $140 million reduction in financial aid for college students.
• $2.5 billion cut in medical research.
• $600 million reduction to the federal disaster relief fund.

To make matters worse, programs with unfunded or underfunded mandates—including Real ID, No Child Left Behind Act, homeland and border security programs, Individuals with Disabilities Education Act, and the state criminal alien assistance program—would be further underfunded or remain unfunded.

On the defense side, we can expect almost $4 billion in cuts to operations and maintenance, a $2 billion reduction in research, development, and evaluation, and a $700 billion decline in procurement. A new analysis released on Friday by a defense industry trade group projected that defense cuts would cost 2.14 million American jobs.

But it’s not all bad news for states. While sequestration affects virtually every category of domestic discretionary spending, most state-fed entitlement programs are exempt, including Medicaid, the Temporary Assistance for Needy Families Block Grant (TANF), the Supplemental Nutrition Assistance Program (SNAP), and the Children’s Health Insurance Program (CHIP).

In January, NCSL’s Deficit Reduction Task Force sent a letter to the White House and Congress urging Washington to “go big” on deficit reduction and explore all possible avenues, including discretionary spending, entitlement reform and revenue options.

Congress still has time to prevent these cuts from taking effect, though that likely won’t happen until after the election. In the meantime, states should prepare for the worst and hope for the best.

Comments

[James Kester]

Was this supposed to be some kind of a secret?
When, were the U.S. Congressional Members who represent you (wherever you reside), going to tell you the real story? Is a matter of fact, when Congress returned on September 10th, they decided on the 17th, they were in the media cross-hairs in Washington on the issue of the $16 Trillion Bill you are leaving for our children. So they left Washington, and ran to hide in their districts behind the election coverage. HERE'S MY ADVICE TO EVERYONE, FIND OUT WHERE THEY ARE, AND GET IN THERE FACE!